Measuring Bank Efficiency in the ASEAN Economic Community
Keywords:
Efficiency, DEA, AECAbstract
The organization of local banks in this region will change with the advent of the ASEAN Economic Community (AEC) on December 31st, 2015. The process of financial deregulation has given bank management a motivation to concentrate on increasing efficiency, particularly in the area of competition. Utilizing Data Envelopment Analysis (DEA) software version 2.1, it looked into whether the AEC's banking system has been more efficient between 2017 and 2019.
Three approaches are introduced to measure bank efficiency – the intermediation approach, the production approach, and the income-based approach. Graphs are diagrammed by using the results of its approach to posit and show the bank’s competitiveness with two axes. The results suggest that Malaysian banks were relatively more efficient rather than other banks. The outlook for the Malaysian banking system remains stable, together with strong capital and liquidity because of government support. It could be concluded that the robust banks derived from government policy.
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